In March 2019, a former client of CoreCap Investments, Inc. won an award in a FINRA arbitration for $1,161,333, which included compensatory damages of $699,000, $72,720 in prejudgment interest, $118,573 in attorney fees, $15,000 in costs and the $300 filing fee. The investors were clients of financial advisor Ernest Romer II (CRD# 2311741).
The causes of action included breach of fiduciary duty, common law fraud/silent fraud/innocent misrepresentation; negligence; violations of the Michigan Uniform Securities Act (“MUSA”) MLC§ 451.2509; and failure to supervise [FINRA Rule 2341]. The causes of action relate to Respondents’ alleged embezzlement of Claimants’ funds. The FINRA arbitration hearing was conducted in Detroit, Michigan.
Romer is alleged to defraud at least 30 customers out of $2.7 million. Romer was registered with Corecap Investments, Inc. in Sterling Heights, Michigan from October 2012 to January 2017 when he was terminated regarding, “Failure to report outside business activity and violations of firm policies relating to transactions with clients.”
Previously, he was registered with L.M. Kohn & Company in Sterling Heights, Michigan from July to October 2012 and with Leonard & Company in Sterling Heights, Michigan from 2005 to 2012. In 2005, Romer was terminated from Comerica Securities, Inc. regarding, “Customer complaint was received alleging: failure to follow instructions in that the customer authorized the use of only $200,000 as the investment amount; failure to follow instructions in that the RR did not place a stop loss order; and, that the RR did not manage the account according to the customer’s investment goals.” In 1998, Romer was terminated from Nat City Investments, Inc. regarding, “Unauthorized option trades.” In 1995, Romer was terminated from Independence One Brokerage Services, Inc. regarding, “Internal investigation alleged I borrowed and/or lent money from/to customer in violation of written b/d policy. I voluntarily resigned prior to investigation being concluded.”
In April 2019, FINRA suspended Romer indefinitely after he failed to comply with an arbitration award or settlement agreement or to satisfactorily respond to a FINRA request to provide information concerning the status of compliance.
In February 2019, the Securities and Exchange Commission (SEC) charged Romer with embezzlement. Romer pled no contest to 13 counts of felony embezzlement in violation of Michigan Compiled Laws. In December 2018, Romer was convicted on the 13 counts of embezzlement and sentenced to 85 to 240 months in prison and ordered to pay $2.65 million in restitution. According to the SEC, “The embezzlement counts of the criminal complaints to which Romer pled no contest and to which he was convicted alleged, among other things, that as an agent, servant, or employee of certain named persons and/or being a trustee, bailee, or custodian of the property of such named persons, did convert to his own use or take or secrete with intent to convert to his own use, without consent of his principal, money or personal property of his principal having a value ranging from between $20,000 to $50,000 and/or $100,000 or more, that came into his possession or under his charge or control by virtue of his relationship with the principal.”
In September 2018, the Securities and Exchange Commission (SEC) brought civil law enforcement action to address Romer’s multi-million-dollar securities fraud. According to the SEC from approximately 2014 through 2016, Romer defrauded at least 30 of his retail brokerage customers out of $2.65 million. It is alleged that Romer persuaded at least 30 of his customers to sell securities in their CoreCap Investments accounts and transfer the proceeds to either P&R Capital, LLC or CoreCap Solutions, LLC. According to the SEC, “Romer represented to customers that upon transferring money to P&R Capital and CoreCap Solutions, he would invest their money in the stock market and earn them a better return than their current investments. Based on Romer’s representations, the customers understood that CoreCap Solutions and P&R Capital were affiliated with CoreCap Investments. Romer’s statements to his customers were false. P&R Capital and CoreCap Solutions were Romer’s personal businesses and had no relationship to CoreCap Investments. Romer did not invest the customers’ money in the stock market for their benefit. He instead stole the money for his own personal use. Romer commingled approximately $2.7 million of customer funds with his advances from CoreCap Investments and other sources for a total of approximately $4.4 million. Of that, Romer used approximately $3.5 million for trading in his personal brokerage accounts, paid approximately $714,000 to cover his personal expenses, paid approximately $343,000 to customers of his prior brokerage firms, paid approximately $302,000 to customers of CoreCap Investments, and transferred approximately $41,000 to family members.”
In September 2017, Michigan Dept. of Licensing & Regulatory Affairs opened an investigation into Romer regarding, “Gary L. Pannecouck alleges that registrant stole funds from him.” And in August 2017, Michigan Dept. of Licensing & Regulatory Affairs opened an investigation into Romer regarding, “Investigation into complaint of Robert Kowalewski that registrant stole funds from him.”
In August 2017, the state of Michigan sanctioned Romer to a cease and desist and ordered him to pay $1 million in civil and administrative penalties and fines following an investigation alleging that he operated a fraud in which he convinced customers to liquidate securities, depot the funds into an account he controlled, and use the funds for his own benefit. The state of Michigan revoked Romer’s registration and barre him from registration with a broker-dealer.
In July 2017, FINRA barred Romer from association with any FINRA member in all capacities after he failed to respond to a FINRA request for information.
In January 2016, Romer was sanctioned to $10,000 in civil and administrative penalties and fines and suspended him for one month after he consented to the sanctions and to the entry of findings that he failed to disclose on his initial Form U4 the existence of an IRS tax levy and State of Michigan tax liens filed against him.
In addition to the case above, Romer has been the subject of 18 additional customer complaints between 1998 and 2018, two of which were denied, according to his CRD report:
- July 2018. “Claimant alleged RR stole money from her, representing it as loans and/or investments.” The client sought $220,000 in damages and the case was settled for $130,000.
- April 2018. “Plaintiffs allege that for a period of many years Romer solicited investments in an entity called P&R Capital which turned out to be Romer’s personal LLC, all of which resulted in the conversion of Plaintiffs’ funds.” The customer sought $590,708 in damages and the case was settled for $170,000.
- April 2018. “Clients allege theft of funds.” The customer sought $167,500 in damages and the case was settled for $148,000.
- March 2018. “Alleged that Romer stole $222,000 from Claimant through requesting funds for non-existent investments.” The customer sought $222,000 and the case was settled for $110,000.
- February 2018. “Complainant alleges that Romer stole $45000 from him through alleged investments in Romer’s company.” The customer sought $45,000 and the case was settled for $27,500.
- December 2017. “Alleges fraud and theft of money against rep and negligent supervision against firm.” The customer sought $535,000 in damages and the case was settled for $210,000.
- November 2017. “Clients claim that Romer solicited funds for investment which were converted to his personal use.” The customer sought $250,000 in damages and the case was settled for $125,000.
- October 2017. “Client alleges that Representative took funds from her under false pretenses for alleged investments in two companies which actually belonged to Representative.” The customer sought $250,000 in damages and the case was settled for $115,000.
- September 2017. “Claimant alleges that he loaned money to registrant and did not receive it back; false representations about tax consequences.” The customer sought $115,000 in damages and the case was settled for $60,000.
- September 2017. “Claimant alleges that Romer stole $80,000 from him by borrowing it, purporting to make an investment with it and failing to return or invest the money.” The customer sought $80,000 in damages and the case was settled for $57,500.
- August 2017. “Client alleges that Romer stole funds from him in the amount of approximately $150,000 and failed to make promised investments.” The case is currently pending.
- August 2017. “Alleges that Romer took $60000 from her under false pretenses and has failed to invest or return the money.”The case is currently pending.
- August 2017. “Claimants alleges that Romer solicited funds from them to invest in a firm owned by him P&R Capital. They further allege that no such investment was ever made and that Romer converted the funds to his own use. Plaintiffs also allege that there were improper sales practices the sale of an annuity to them.” The customer sought $110,000 in damages and the case was settled for $75,000.
- July 2017. “Complainants allege that Romer solicited $50,000 from them to invest in “Corecap Solutions” but converted the money to his own use. Claimants did not name Romer, but firm has brought him in as third party defendant as of July 27, 2017.” The customer was awarded $50,000.
- July 2017. “Complainant alleges that Romer converted $46,000 of his funds through an alleged investment in P&R Capital.” The customer sought $46,000 in damages and the case was settled for $28,000.
- October 2005. “Transaction: purchase of 75,000 shares of (symbol)cien totalling $396,000 in march 2004. The customer alleges: failure to follow instructions in that the customer claims he authorized only a $200,000 investment amount; failure to follow instructions in that the rr did not place a stop loss order; and, that the rr did not manage the account according to the customer’s investment goals. The firm settled with the customer.” The customer sought $228,495 in damages and the case was settled for $116,532.50.
- November 2003. “The customer’s statement of claim alleges that in june and july of 2001, the rr recommended the purchase of variable annuities. Claimant alleges that the sub-account allocation recommended by the RR was not suitable given claimant’s circumstances and investment objectives and that RR failed to disclose the risks of the investment.” The customer sought $184,000 in damages and the case was settled for $100,000.
- October 1998. “Unauthorized option trades.” The case was settled for $130,110.71.
Pursuant to FINRA Rules, member firms are responsible for supervising a broker’s activities during the time the broker is registered with the firm. Therefore, Corecap Investments, Inc. may be liable for investment or other losses suffered by Romer’s customers.
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